Jagoda & Anor and Jagoda
[2018] FamCA 848
•28 September 2018
FAMILY COURT OF AUSTRALIA
| JAGODA AND ANOR & JAGODA | [2018] FamCA 848 |
| FAMILY LAW – COSTS – Whether Costs ought be awarded – Section 117 of the Family Law Act |
| Family Law Act 1975 (Cth) Family Law Rules 2004 (Cth) Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) |
| ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559 Warby & Warby (2002) FLC 93-091 |
| APPLICANTS: | Mr N Jagoda and Ms P Jagoda |
| RESPONDENT: | Ms Jagoda |
| FILE NUMBER: | PAC | 778 | of | 2013 |
| DATE DELIVERED: | 28 September 2018 |
| PLACE DELIVERED: | Parramatta |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: |
| SOLICITOR FOR THE APPLICANT: |
| COUNSEL FOR THE RESPONDENT: |
| SOLICITOR FOR THE RESPONDENT: |
Orders
The application for costs made by the applicants Mr N Jagoda and Ms P Jagoda is dismissed.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Jagoda and Anor & Jagoda has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT PARRAMATTA |
FILE NUMBER: PAC 778 of 2013
| Mr N Jagoda and Ms P Jagoda |
Applicants
And
| Ms Jagoda |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application for costs filed by Ms P and Mr N Jagoda, the second and third respondents to the substantive proceedings. They are the parents of the husband, Mr Jagoda, and seek costs in relation to the proceedings between the husband and the wife, Ms Jagoda. I will refer to the second and third respondents herein as the applicants.
The applicants filed an Application in a Case on 27 April 2017 seeking costs against the wife in the sum of $69,373.69. Their Application contained the following orders sought:
1.Order as against the [wife] that the [applicants] be entitled to costs on a lawyer and client basis pursuant to;
a) Section 117(2) of the Family Law Act 1975 and Rule 19.18(1)(b) of the Family Law Rules, and
b) On the basis of accrued jurisdiction, pursuant to Section 98(1) of the Civil Procedure Act 2005 (NSW) and Rule 42.1 of the Uniform Civil Procedure Rules.
2.That costs be in the sum of $69,373.69.
3.Alternatively to the order sought in paragraph 2 order that the costs be calculated in accordance with the Cost Schedule annexed hereto.
4.Pending payment that the costs be charged upon the whole of the land in Certificate of Title Folio Identifier … (“the [Suburb V] property”).
5.That the costs be paid on or before the 1st July 2017.
The applicants relied on an affidavit of their solicitor, Mr A, and written submissions.
The wife, who was the first respondent in the substantive proceedings, filed a Response on 11 August 2017 seeking that the costs application be dismissed and that the applicants pay her costs of, and incidental to, the costs application. The wife relied on her affidavit sworn 11 August 2017, her Financial Statement sworn 11 August 2017 and written submissions.
The Proceedings
Final orders were made and a judgment delivered in the substantive proceedings on 31 March 2017.
The relevant orders of 31 March 2017 can be summarised as follows:
·The wife to transfer her interest in the Suburb T property to the husband;
·A declaration that the husband holds his interest in the Suburb T property on trust for his parents (the applicants in these proceedings), and that the husband transfer the property to the applicants upon their request;
·The husband not further encumber the Suburb T property without the written consent of his parents;
·The wife to pay $195,827 to the H Bank Portfolio Loan account as partial repayment of capital (this is the loan secured over the Suburb T property) and the husband to thereafter be responsible for payment of the balance of the loan;
·The wife to pay the H Bank loan secured over the Suburb V property;
·The husband to transfer his interest in the Suburb V property to the wife;
·The wife to pay the husband the sum of $96,329.
The evidence
The applicants relied on an affidavit of their solicitor Mr A sworn 24 April 2017.
Mr A deposed that the total costs paid by the applicants to his firm were $44,592.19. Counsel’s fees totalled $23,540. The applicants also paid interpreter’s fees of $1,241.50. Thereby the total cost paid by the applicants was $69,373.69.
The applicants sought to intervene in the substantive proceedings between the husband and wife by way of an Application in a Case filed on 7 October 2014. Leave was granted and the applicants became the second and third respondents.
The applicants sought orders in the substantive proceedings as contained in their Response filed 23 January 2015. They sought that a declaration be made by the Court that the husband and wife hold 100 per cent of the Suburb T property upon trust for the second and third respondents, and that the husband and wife transfer the Suburb T property to the second and third respondents, with the costs of the transfer to be met by the husband and wife.
On 13 December 2014 the applicants caused their solicitor to send an offer of compromise to both the husband and the wife. The applicants offered to pay to the husband and wife the sum of $70,000 in exchange for the transfer of title in the Suburb T property free from encumbrance.
The wife relied on her affidavit and Financial Statement sworn 11 August 2017.
The wife deposed that she has obtained a loan in the sum of $470,000 in order to comply with the orders of 31 March 2017. The wife currently resides with her parents and is leasing the Suburb V property for $560 per week. She has primary care of the child B, aged eight.
The wife deposed that the amount borrowed represents the limit of her borrowing capacity, based on representations made to her by her mortgage broker. She believes she is unable to borrow any further funds.
The amount the wife was required to pay to comply with the orders of 31 March 2017 were as follows:
·$195,827 to the H Bank Portfolio Loan account (Order 4(a));
·$96,329 to the husband (Order 4(c));
·$155,402.17 to discharge the mortgages secured over the Suburb V property (Order 4(b));
·$1,004.20 by way of fees associated with the mortgage.
The wife deposed that she has borrowed funds from her sister to pay out her personal loan to the Commonwealth Bank in the amount of $30,000, and to reduce her credit card debt, a further $7,612.
The wife deposed that she has no source of funds other than her income from which to pay a costs order.
The wife is employed part-time for a large company. Her weekly income from her employment is $1,350. She also receives income by way of rent from the Suburb V property, Centrelink benefits and Child Support payments for B, a total of $754 per week. Her total weekly income is $2,104.
The wife’s total weekly expenditure is $1,675. This figure includes superannuation contributions of $109 per week. The wife asserts she spends $606 per week on day-to-day living expenses for herself and B.
The relevant principles
The applicants sought orders that they be entitled to costs on a lawyer/client basis pursuant to s 117(2) of the Family Law Act 1975 (Cth) and Rule 19.18(1)(b) of the Family Law Rules 2004 (Cth), and on the basis of accrued jurisdiction pursuant to the Civil Procedure Act 2005 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW).
Costs pursuant to the Family Law Act
The relevant provision with respect to the making of a costs order is s 117 of the Family Law Act 1975 (Cth). Section 117 provides:
(1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A) In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
Rule 19.18 of the Family Law Rules pertains to the method of the calculation of costs. It provides as follows:
Method of calculation of costs
(1) The court may order that a party is entitled to costs:
(a) of a specific amount;
(b)as assessed on a particular basis (eg lawyer and client, party/party or indemnity);
(c)to be calculated in accordance with the method stated in the order; or
(d)for part of the case, or part of an amount, assessed in accordance with Schedule 3.
Example: For paragraph (1)(c), the stated method may be in accordance with Schedule 3 but with an additional percentage for complexity.
(2)If costs are payable under the Act or these Rules, or the court orders that costs be paid and does not specify the method for their calculation, the costs are to be assessed on a party/party basis.
(3)In making an order under subrule (1), the court may consider:
(a) the importance, complexity or difficulty of the issues;
(b) the reasonableness of each party's behaviour in the case;
(c)the rates ordinarily payable to lawyers in comparable cases;
(d) whether a lawyer's conduct has been improper or unreasonable;
(e)the time properly spent on the case, or in complying with pre-action procedures; and
(f)expenses properly paid or payable.
Accrued jurisdiction
The applicants submitted that they were granted leave to intervene in the proceedings in accordance with the accrued jurisdiction of the Court. They relied on the case of Warby & Warby (2002) FLC 93-091 (“Warby”).
It was submitted by the applicants that the acceptance of accrued jurisdiction to deal with the applicants’ claim necessarily led to the Court having power to make orders as to costs set out in section 98(1) of the Civil Procedure Act.
It is well accepted that once the Court’s accrued jurisdiction has been attracted, there is no discretion not to exercise it (ASIC v Edensor Nominees Pty Ltd (2001) 204 CLR 559, at 585 (Gleeson CJ, Gaudron and Gummow JJ); Noll & Noll and Anor (2013) FLC 93-529, at 86,952 (Bryant CJ, Finn and Strickland JJ))
At paragraph 6 of the judgment delivered on 31 March 2017, I stated as follows:
6. The jurisdiction to determine the orders sought by the second and third respondents was not challenged before me. The second and third respondents relied upon the decision of Warby & Warby (2002) FLC 93-091 (“Warby”) to establish that this Court has accrued jurisdiction to determine the dispute between the wife and the second and third respondents as it is necessary to do so in order to determine what property is available to the Court to divide between the husband and wife. With respect, I agree this case does fall within the body of cases described in Warby as being within the jurisdiction of the Court to determine.
Section 98 of the Civil Procedure Act provides as follows:
(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.
(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court.
(3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings.
(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:
(a) costs up to, or from, a specified stage of the proceedings, or
(b) a specified proportion of the assessed costs, or
(c) a specified gross sum instead of assessed costs, or
(d) such proportion of the assessed costs as does not exceed a specified amount.
(5) The powers of the court under this section apply in relation to a married woman, whether as party, tutor, relator or otherwise, and this section has effect in addition to, and despite anything in, the Married Persons (Equality of Status) Act1996 .
The applicants submitted that the Court must also have regard to rule 42.1 of the Uniform Civil Procedure Rules which is authority for the general rule that costs follow the event.
It was submitted by the wife that there is no basis for the applicants to seek costs pursuant to the Civil Procedure Act as the proceedings were dealt with wholly under the Family Law Act. She submitted that although Warby provided the applicants with the right to intervene in the proceedings, there is nothing in Warby that goes to how the costs of the proceedings should be dealt with. The wife submitted that the costs application should be dealt with solely pursuant to the Family Law Act.
Consideration
In determining firstly whether a costs order should be made, I propose to have regard to each consideration contained in subsection 117(2A).
The financial circumstances of each of the parties to the proceedings
The applicants did not provide any evidence of their current financial circumstances. The wife submitted that the applicants gave evidence in the substantive proceedings that they own a property in Suburb PP unencumbered. As a result of the orders made 31 March 2017, the husband holds the Suburb T property, unencumbered, on trust for the applicants.
The evidence of the wife was that she has endured financial hardship since the orders made 31 March 2017. She has had to borrow funds to her maximum capacity and return to live with her parents.
The wife earns $2,104 per week and spends $1,675. That leaves her with $429 each week. She currently pays $468 per week by way of mortgage repayments. These are interest-only payments and she has deposed that these will increase after two years to payments of principal and interest. I note she did not include, in her Part G expenses of her Financial Statement, any sum by way of payment to her sister for the loan.
The wife has primary care of B, who is currently aged eight.
In response, the applicants submitted that they are retired and unable to earn an income, unlike the wife. They submitted that they have worked hard their whole lives to reach a comfortable financial position during their retirement.
Whether any party to the proceedings is in receipt of assistance by way of legal aid, if so, the terms of the grant of that assistance to that party
This consideration does not apply.
The conduct of the parties to the proceedings
The wife submitted that the applicants chose to intervene in the proceedings in circumstances where providing their oral evidence would have been sufficient. She submitted that, had the applicants provided oral evidence rather than intervening, they would have saved themselves their entire legal costs and, in turn, saved the wife legal costs in having to meet the separate case of the applicants. The wife asserts that the final orders could have been made even if the applicants had not been party to the substantive proceedings.
The applicants refuted the wife’s suggestion that they were not required to intervene in the proceedings. They submitted that it would have been imprudent had they not intervened as they anticipated their rights being affected by the outcome of the proceedings. In making this submission they relied on Rule 6.02(1) of the Family Law Rules 2004 (Cth).
Whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court
There was no failure by any party to comply with previous orders of the Court.
Whether any party to the proceedings has been wholly unsuccessful in the proceedings
The wife submitted that the orders sought by the applicants in the substantive proceedings were not granted.
The applicants sought to establish that the Suburb T property was held on trust for them by the husband and wife, and that the Suburb T property be transferred to them free of encumbrance. The Court found that the Suburb T property was held on trust for the applicants and consequently, a declaration was made to that effect.
The orders further provided that the wife pay the husband the amount of $195,827 by way of partial repayment of the H Bank loan secured over the Suburb T property and that the husband be responsible for payment of the balance owed on the loan.
At trial, the wife sought that the husband transfer his interest in the Suburb V property to her, and that she transfer her interest in the Suburb T property to the husband. Orders were made to that effect. The wife also sought that liability against the Suburb T property be met solely by the husband, and that he be responsible for the loan secured over the Suburb V property, save for $185,000 which she would be responsible for. Those orders were not made.
The wife’s position at trial was different to that in her Response which was filed on 3 July 2014, in which she sought the sale of both the Suburb V and Suburb T properties and 80 per cent of the net proceeds.
Neither the applicants nor the wife were wholly unsuccessful in the substantive proceedings, nor were either of the parties wholly successful.
Whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer
The applicants made an offer to settle the matter on the basis that they would pay the husband and wife $70,000 in return for the title of the Suburb T property, unencumbered. This offer was made on 13 December 2014, after the applicants were joined to the proceedings but prior to filing their Response.
The wife submitted that her evidence, which was accepted at trial, was that she had no knowledge of the arrangement between the husband and his parents in relation to the Suburb T property. In those circumstances, she submitted it was reasonable to reject an offer requiring the transfer of a property, of which she owned half, to the applicants.
Such other matters as the court considers relevant
The single most important fact or facts in this matter which in my view have the effect of being contraindicative to the applicants case for costs is that they failed to make the position with respect to the title to the Suburb T property legally clear and uncontroversial when they allowed the title to that property to be transferred to the husband and wife so that the husband and wife could use the property as security for the borrowing of substantial funds. The only explanation which could be given for that failing appeared to be that it was a transaction within their family. However, once the husband married, the family then extended to in-law members. In the circumstances it was entirely unfair to the wife for the applicants not to make the legal position clear to her. She may well have acted differently had she been aware that neither she nor the husband had any beneficial interest in that property.
The wife submitted that the Court ought to consider the effect that her lack of knowledge in relation to the arrangement between the husband and his parents has had on her and B.
Conclusion
I conclude that the application for costs by Mr N Jagoda and Ms P Jagoda fails in this case. The stand out reasons for that outcome including:
(a)That the offer of settlement made by them to the wife, relied upon in this application, because the applicants did not receive the title to their property unencumbered. There remained, at the time of judgment, a substantial financial encumbrance to the H Bank on the property.
(b)That the applicants substantially contributed to the necessity for the court to determine whether they were the beneficial owners of the Suburb T property by failing to have the transaction entered into between themselves and the husband and wife properly and legally documented.
(c)The financial position of the wife is such that to burden her with a costs order would be crippling for her. It would probably lead to her having to sell her property to meet all her liabilities.
For the above reasons I propose to dismiss the application for costs sought by the applicants Mr N Jagoda and Ms P Jagoda.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 28 September 2018.
Associate:
Date: 28 September 2018
Key Legal Topics
Areas of Law
-
Civil Procedure
Legal Concepts
-
Costs
0
1
4